While property reassessment is generally important for maintaining fairness and accuracy in taxation systems, there can be negative consequences associated with the process. Property reassessment can lead to tax increases and a shift in the tax burden among property owners.
If some properties have appreciated significantly in value while others have not, the reassessment process may result in some property owners experiencing a substantial increase in their property taxes. This can be especially challenging for long-term residents on fixed incomes who may struggle to afford higher taxes.
In areas experiencing rapid gentrification or property value increases, reassessment can contribute to the displacement of lower-income residents who can no longer afford the higher property taxes. This can disrupt established communities and lead to social and economic inequalities.
An attorney can play a valuable role in helping clients navigate the complexities of property reassessment and find ways to avoid or mitigate the impact of reassessment. For example, she can review property purchase agreements and transactions, provide guidance on improvement projects that can trigger reassessment, and provide strong advocacy during reassessment disputes
Understanding Property Reassessment
Property reassessment is important for maintaining fairness, accuracy, and revenue generation in property taxation systems. Property values can change over time due to various factors, such as market fluctuations, improvements, and changes in the local area. Reassessing properties helps ensure that property taxes accurately reflect the current market value. This prevents inequities where some property owners pay more or less than their fair share of taxes.
Property taxes are a significant source of revenue for local governments. When property values increase, reassessment ensures that the government collects appropriate taxes based on the updated values. This revenue is essential for funding schools, infrastructure, public safety, and community programs. Accurate property assessments provide local governments with a clearer understanding of their tax base. This information is crucial for budgeting and planning future projects, as well as determining how to allocate resources effectively to meet the needs of the community.
Process of Reassessment
In California, property reassessment is governed by the rules established by Proposition 13, which was passed by voters in 1978. Proposition 13 introduced significant changes to property taxation in the state, including limitations on property tax increases and the process of reassessment. Proposition 13 stipulates that the assessed value of a property can only increase by a maximum of 2% per year, regardless of changes in market value. When a property changes ownership or undergoes new construction, its assessed value is “reset” to the current market value, which becomes the new base year value. This is commonly referred to as a “change in ownership” reassessment trigger.
A change in ownership generally occurs when there is a transfer of legal title to the property. This can happen through sales, inheritances, gifts, certain types of leases, and other transactions. When a change in ownership occurs, the property is reassessed to its current market value. Some transfers of property are excluded from reassessment, meaning they do not trigger a change in assessed value.
For example, transfers between spouses, transfers from parents to children, and transfers of certain types of property, such as principal residences, are generally excluded from reassessment under specific conditions. The parent-child exclusion allows parents to transfer their primary residence and up to $1 million of the assessed value of other property to their children without triggering reassessment. Certain requirements must be met for this exclusion to apply, as Proposition 19 rolled back some protections.
Proposition 58, passed in 1986, extended the parent-child exclusion to include transfers from grandparents to their grandchildren as long as the parents are deceased. This aims to help families maintain ownership of family properties without facing steep property tax increases.
Factors that Trigger a Reassessment
Aside from changes in ownership, certain events can trigger a reassessment. For example, property renovations or new construction can lead to a reassessment of the added value. Local assessors determine whether an event qualifies as a reassessment trigger.
The Legal Aspects of Property Reassessment
Property owners who disagree with their property’s reassessed value have the right to appeal to the local county assessment appeals board. They can present evidence to support their claim that the assessed value is incorrect. If not satisfied with the outcome, property owners can further appeal to the State Board of Equalization.
Proposition 8, passed in 1978, allows for temporary reductions in assessed value when a property’s market value falls below its assessed value. This provision helps protect property owners during economic downturns.
It’s important to note that property reassessment rules in California can be complex and can vary based on specific circumstances. Property owners seeking to understand their reassessment obligations or exploring ways to minimize reassessment impacts should consider consulting with a qualified real estate attorney or tax professional familiar with California’s property tax laws.
Long-term Planning to Avoid Unwanted Reassessment
Professional counsel will provide important strategic advice on property purchases, sales, and improvements. In addition, they will draw up a list of estate planning considerations to avoid reassessment. These can include methods of transferring property title to co-owners as tenants in common and then transferring the property to joint tenancy. Similar methods involve the use of LLCs when making the original purchase.
The Value of Legal Guidance
An attorney can help avoid unwanted and costly reassessment. Attorneys can help you strategically plan your property purchases, sales, and improvements. This could involve timing property transfers, structuring transactions, and managing your assets in ways that maximize tax advantages.
Our attorneys are well acquainted with property assessment and regularly counsel clients on related issues. If you possess assets that could benefit from a legal perspective to minimize tax obligations, we are enthusiastic about addressing your inquiries and offering sound legal counsel. We are prepared to take initiative and actively participate in safeguarding your assessment. Get in touch with the dependable lawyers at Lowthorp Richards at (805) 981-8555 or fill out our online contact form. We operate primarily in the Tri-Counties area – Ventura, Santa Barbara, and San Luis Obispo.